U.S. Justice Department, American Airlines dispute value of slots

Diane Bartz

3 Min Read

WASHINGTON (Reuters) - The U.S. Justice Department said on Monday that American Airlines Group made $425 million by selling takeoff and landing slots at two busy East Coast airports, as required to win approval for the merger that set up the company.

People walk past an American Airlines logo on a wall at John F. Kennedy (JFK) airport in in New York November 27, 2013. REUTERS/Carlo Allegri

The company’s chairman challenged that figure.

The department, in a routine filing, also asked a federal judge to approve with no changes the settlement it reached with US Airways and American Airlines. That settlement ended a fight over whether the government would allow the two to merge.

The two companies formally merged in December, creating American Airlines Group Inc, but the deal requires a judge’s final approval.

The Justice Department said that American Airlines was paid more than $425 million for the slots that it was required to sell at Ronald Reagan National Airport outside Washington and New York’s LaGuardia International Airport.

But American Airlines Chief Executive Doug Parker said during a J.P. Morgan investor conference on Monday that American got $381 million in cash plus the 24 slots at New York’s JFK it received in a swap with JetBlue Corp.

He said the proceeds were “well in excess” of what American expected to receive, adding that the slots had been appraised at about $225 million.

“I believe (that) in the DOJ (Justice Department) filing, they value that at $425 million; that’s their valuation, not ours,” Parker told the conference.

American Airlines Group was also required to divest 34 slots at New York LaGuardia International Airport. Southwest Airlines Co won an agreement to purchase 22 and Virgin America will buy 12.

Virgin America won eight slots at Reagan National, while New York-based JetBlue Airways won 40 slots, including two Sunday slots.

The Justice Department said that Southwest had declined the Sunday slots and that they would be returned to the Federal Aviation Administration to be reallocated.

American is also required to shed two gates each at Dallas Love Field and airports in Chicago, Boston, Los Angeles and Miami. Most of those will be sold in the next few weeks, according to a source close to the Justice Department.

In the filing with the U.S. District Court in Washington, the Justice Department’s antitrust enforcers also said that consumer groups’ objections to the merger of the two companies were without merit.

“The remedy is a major victory for American consumers,” the Justice Department said in the filing. “By introducing new low-cost capacity and service on numerous routes around the country, it enhances the ability of LCCs (low cost carriers) to thwart industry coordination among the legacy carriers.”